5 Energy Companies That Could Lift Shareholder Payouts

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Several big energy companies could announce larger returns to shareholders—including big dividends—in the coming months, and the news could boost their shares, according to

Cowen

analyst Jason Gabelman.

When energy prices have been volatile, dividend and buyback announcements have helped boost the shares of energy companies. Oil stocks have stayed relatively strong even as oil prices have fallen nearly 30% since their March peaks. Dividends have helped, giving investors certainty about returns even as the underlying economics in the industry fluctuate.

Gabelman found five names with market capitalizations over $10 billion that could get boosts from announcements about more shareholder returns.

French energy giant

TotalEnergies

(TTE) has a “somewhat conservative” buyback plan and has been a reliable dividend payer, deciding not to cut its dividend during the pandemic even as peers reduced their payouts. Its dividend yield is now 4.5%. Total could repurchase $10 billion worth of shares next year, though Gabelman expects the company to buy $8 billion. It could announce changes at its Sept. 28 analyst day. 

U.S. refiner

Marathon Petroleum

(MPC) also has room to improve its payouts. Gabelman thinks the company could boost its annual dividend by 20%, to $2.80 a share. That would lift its dividend yield to 2.8% from 2.3% at the current stock price. Marathon could have $7 billion in net cash at year’s end, and he expects the company to buy back $8 billion worth of shares in 2023, or one-sixth of its market cap. 

British oil and gas giant

Shell

(SHEL) is also well-positioned for a more generous shareholder return policy, Gabelman predicts. Shell cut its dividend in 2020, but has since boosted it. Its dividend yield is 3.6%. Gabelman expects the company to boost it by 25%, which would still leave it below prepandemic levels.

Refinery and chemicals company

HF Sinclair

(DINO) also looks likely to outpace its targets for its buyback, and modestly raise its dividend, by about 5%, according to Gabelman. Its dividend yield is 3%.

Darling Ingredients

(DAR) is a renewable fuels company that uses animal carcasses and other material to create renewable diesel. Darling, which has a joint venture with refinery company

Valero

(VLO), has benefited from more supportive policies for renewable fuels, and is paying off debt faster than expected. Gabelman expects the company to buy back more shares, though the company doesn’t issue a dividend. He thinks a new dividend is “somewhat less likely” than more buybacks.

Write to Avi Salzman at [email protected]